More college graduates won’t improve state's economy

Twodifferent columns recently called on Michigan to bolster its college graduate population. Unfortunately, this is unlikely to improve the state’s economic situation.

However, it shows that the state has an oversupply of talent mercantilists.

Mercantilism is the discredited idea that all a country needs to do to grow wealthy is to increase its supply of gold and other precious metals. The new talent mercantilists focus not on gold and silver, but instead on increasing a state’s supply of college graduates.

While it’s certainly true that people with college degrees tend to be more employable and have higher incomes, it does not follow that states increasing their college graduate populations will itself lead to greater state prosperity. The chart nearby (click to enlarge) looks at the relationship between increasing a state’s graduate population (on the x-axis) and whether this led to increased personal income (lagged and placed of the y-axis).

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Despite the theory espoused by the talent mercantilists, there is no clear connection between grads and growth. (The possibility is further explored here.)

Even if there were a connection between grads and growth, it’s unclear what state policy can do to increase its graduate population. Seeing a degree through to completion is the student’s choice and many choose to drop out (often with large debt). The students who make it to graduation are some of the most mobile people in America. With difficulty in developing and retaining graduates, there seems to be little that policy can do to influence this directly.

It’s better to use tried and true ways of increasing the state’s economic growth: lowering tax burdens, lessening regulation, securing property rights and providing adequate cost-effective infrastructure. These are the basics of the state’s interaction with the private economy. And unlike the ability to develop, attract and retain college graduates, state policymakers directly control these levers.